Can Bankruptcy Save Your Home? Understanding Homestead Exemptions

Financial struggles can put your home at risk. If you’re behind on mortgage payments or facing foreclosure, bankruptcy may offer a solution. The homestead exemption can provide some protection for your primary residence from creditors. Understanding how it works can help you make informed decisions.

What Is the Homestead Exemption?

The homestead exemption helps shield a portion of a home’s value from certain creditors in bankruptcy. Unlike some states with unlimited protection, Georgia sets a cap on the amount of equity you can protect. The exemption applies only to primary residences, not rental properties or vacation homes.

Under Georgia law, a homeowner can exempt up to $21,500 of equity in their primary residence. If a married couple files jointly, they can double the exemption to $43,000. This exemption allows homeowners to protect some of their home equity while managing debt.

How Bankruptcy Affects Your Home

Bankruptcy helps eliminate or restructure debts, but its impact on your home depends on the type of bankruptcy you file.

• Chapter 7 Bankruptcy: This liquidates assets to pay creditors. If your home equity is within the homestead exemption limit, you can keep your home. If it exceeds the limit, the trustee may sell the home to pay debts.
• Chapter 13 Bankruptcy: This reorganizes debts and allows you to catch up while keeping your home. The homestead exemption still protects a portion of your equity.

When the Homestead Exemption Doesn’t Help

The homestead exemption does not protect against foreclosure if you are behind on mortgage payments. The lender still has the right to foreclose. Filing for Chapter 13 bankruptcy can halt foreclosure and give you time to catch up on payments.

Property taxes and HOA fees also fall outside the homestead exemption. If you fail to pay these, your home may still be at risk.

Georgia’s Homestead Exemption vs. Other States

Georgia’s homestead exemption is more limited compared to states with unlimited protection, but it still offers essential benefits. Some states allow homeowners to protect significantly more equity, while others have lower limits. If you’re considering bankruptcy, understanding your state’s exemption laws is crucial.

Filing for Bankruptcy to Protect Your Home

If you are considering bankruptcy to save your home, consult a bankruptcy attorney. A lawyer can help you determine if you qualify for the homestead exemption and guide you through the process. Acting quickly is crucial if you are facing foreclosure.

Could Bankruptcy Save Your Home?

Bankruptcy can protect your home, but only under certain conditions. The homestead exemption provides limited protection, and it does not stop foreclosure on its own. If you’re struggling with mortgage debt, filing for Chapter 13 may be the best option. Speak with an experienced attorney to explore your choices.

For more information or to schedule a consultation to discuss your situation, contact R. Flay Cabiness, II, P.C. at (912) 417-5041 (Brunswick, GA); (912) 809-2141 (Hazlehurst, GA); or (912) 324-3176 (Jesup, GA) to schedule a consultation.